Cognis announces significant sales and earnings increase in 2006 annual results

Strategy validated – Cognis announces significant sales and earnings increase in 2006 annual results

  • Sales up 6.2 percent to 3,372 million euros; significant growth in areas that focus on wellness and sustainability trends
  • Operating result up 10.7 percent to 394 million euros
  • Return on sales rises to 11.7 percent (compared to 11.2 percent in 2005)
  • Profit before taxes of 42 million euros and net profit of 2 million euros
  • Free cash flow up 17.5 percent to 168 million euros
  • Acquisitions and investments in core activities
  • Outlook: focus on renewable raw materials offers sustainable growth potential

“The 2006 results have confirmed that our strategy is the right one,” says Cognis CEO Dr. Antonio Trius. “Our focus on providing highly-innovative specialties relating to the wellness and sustainability trends has enabled us to develop our business and achieve profitable growth. The acquisitions and investments we made in the course of 2006 also helped strengthen our market position.”

Global specialty chemicals supplier Cognis increased its net sales by 6.2 percent in 2006, to 3,372 million euros. The company’s operating result (Adjusted EBITDA) rose by 10.7 percent to 394 million euros, representing a return on sales (Adjusted EBITDA as a percentage of sales) of 11.7 percent (compared with 11.2 percent in 2005).

“This significant improvement in our operating result was achieved in spite of a sharp fall in the price of fatty-alcohol-based products, as well as increased energy and raw material costs,” comments Trius. All the company’s strategic business units (SBUs) reported a substantial increase in sales, with Care Chemicals and Functional Products achieving the highest growth rates. The joint venture Cognis Oleochemicals performed almost at the same level as in 2005. Sales generally grew across all regions. The improved results were driven by the growth of sales volume, the associated capacity utilization, and ongoing efficiency improvement measures, particularly in the USA.

The improved operating result meant that the company’s profit before taxes increased by 178 million euros to 42 million euros, while net profit improved by 138 million euros to 2 million euros. As well as the improvement in Adjusted EBITDA, reduced expenditure on non-operational assets, lower extraordinary write-downs and more favorable exchange rates were all factors in this development. One consequence of the improved profit before taxes was that the company’s income taxes rose to approximately 40 million euros. Free cash flow increased by 25 million euros, or 17.5 percent, to 168 million euros. And at 233.4 million euros, cash and cash equivalents were more than double what they were in 2005.

Sales by strategic business unit
Care Chemicals saw its sales rise by 5.6 percent to 1,356 million euros, the biggest contribution of all Cognis SBUs. Lower sales of fatty alcohol products were offset by increased sales of surfactants and specialties. The acquisition of polymer specialists Cosmetic Rheologies in March 2006 strengthened Care Chemicals’ position as a full-service specialty chemicals supplier to the cosmetics industry.

Nutrition & Health recorded a 4.2 percent rise in sales, to 316 million euros. High-margin sterols, CLA (conjugated linoleic acid) and products for the pharmaceutical and healthcare industries all performed well, whereas sales of food technology and vitamin E products fell slightly. The acquisition of Napro Pharma AS, a Norwegian manufacturer of high-quality omega-3 fish oils, enabled Nutrition & Health to expand its range of natural ingredients for dietary supplements and functional foods.

Functional Products achieved growth of 10.4 percent, with total sales of 841 million euros. Business units that performed especially well included Polymers, Coatings & Inks, AgroSolutions, Mining, and the synthetic lubricants business. Growth was strongest overall in Asia. In North America, particularly Polymers, Coatings & Inks substantially increased its market share.

Process Chemicals, which manufactures products for the textile and leather industries, grew its sales by 4.1 percent to 258 million euros. Strong demand in the Asia-Pacific region was a major factor here. Furthermore, the Active Textiles business signed major contracts with well-known apparel manufacturers.

Cognis Oleochemicals, the 50:50 joint venture between Cognis and Golden Hope that started trading on January 1, 2006, saw its sales fall slightly – at 553 million euros, they were 0.7 percent down on 2005. The main reason was an oversupply of glycerin, caused by the increasing biodiesel production, which then put pressure on prices.

Sales by region
Sales increased in all regions. In Germany, there was an increase of 4.7 percent to 1,034 million euros, while the Rest of Europe and South Africa saw a 6.8 percent rise to 899 million euros. In North America, sales increased 5.7 percent to 798 million euros. However, the most significant growth was achieved in Central and South America (163 million euros, up 7.2 percent) and Asia-Pacific (478 million euros, up 8.9 percent). The company opened three new production facilities in Asia last year, which should further accelerate its growth in the region.

Outlook for 2007
In 2007, Cognis will continue to focus on the growth markets for products that serve the wellness and sustainability trends. “In Cognis’ core markets, sustainability is increasingly a factor in customers’ purchasing decisions,” says Antonio Trius. “Renewable resources already account for the majority of our raw materials, and this will continue to be our key focus in future. Our strategy has proven itself the right one, and this is an excellent prerequisite to continue profitable growth over the years ahead.”

Overview 2006 results




Sales Cognis Group

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Operating result (Adjusted EBITDA)

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Return on sales





Earnings before Interest and Taxes (EBIT)

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Profit before taxes (Previous year: loss)

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Net profit (Previous year: net loss)

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Free Cash Flow

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Cash and cash equivalents

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Sales by strategic business unit (inc. joint venture)




Care Chemicals

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Nutrition & Health

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Functional Products

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Process Chemicals

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Cognis Oleochemicals

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Other activities

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Sales by region





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Rest of Europe and South Africa

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North America

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Central and South America

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1) Results restated based on organizational structure as of January 1, 2006.

About Cognis
Cognis is a worldwide supplier of innovative specialty chemicals and nutritional ingredients. The company employs about 8,000 people, and it operates production sites and service centers in 30 countries. Cognis has dedicated its activities to a high level of sustainability and delivers natural source raw materials and ingredients for food, nutrition and healthcare markets, and the cosmetics, detergents and cleaners industries. Another main focus is on products for a number of other industries, such as coatings and inks, lubricants, textiles, as well as agriculture and mining. The company holds a 50-percent stake in the joint venture Cognis Oleochemicals, one of the world’s leading manufacturers of natural-source oleochemical basestocks.

Cognis is owned by private equity funds advised by Permira, GS Capital Partners, and SV Life Sciences.

Cautionary Statement
The statements we make in this release may include statements about our plans and future prospects for the company and the industry that are forward-looking statements. Our actual performance may differ materially from performance suggested by those statements. We urge you to review the cautionary statements in our financial statements for information on factors that could cause those differences.

Susanne Marell, Vice President Corporate Communications
Cognis Deutschland GmbH & Co. KG
Phone: +49-2173-4995-222
E-mail: [email protected]

Susanne Sengel, Senior Corporate Communications Manager
Cognis Deutschland GmbH & Co. KG
Phone: +49-2173-4995-220
E-mail: [email protected]

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